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Monday, October 12, 2009

€200 million macro-financial assistance to Serbia

The European Commission proposed to the Council ofthe EU to provide macro-financial assistance to Serbia, in the form of a loan of up to €200 million. This assistance's role is to support the adjustment programme agreed by the Serbian government with the International Monetary Fund to help the country through the global crisis. This is additional loan to the EU budget support in the form of €100 million in grants agreed in August under the IPA – Instrument of Pre-Accession programme. The Commission today adopted a draft decision recommending to the Council to provide macro-financial assistance (MFA) in the form of a loan of €200 million to Serbia. The loan would be provided in two instalments, tentatively in the second and fourth quarter of 2010.The assistance supports, and is conditional on the respect of the adjustment programme agreed between Serbia and the IMF. It complements the latter's financial assistance to the country. The European Parliament is also consulted.

Earlier this year, the EU had already agreed to pay €100 million in budget support grants under the so-called Instrument for Pre-Accession, which offers assistance to countries aspiring to join the EU. IPA funds are generally used to fund projects.

The global economic crisis started to affect Serbia in the second half of 2008. As the country's external situation became more precarious and the budget came under increasing pressure, Serbia agreed a €3 billion Stand-By Arrangement programme with the IMF in May 2009. Serbia's GDP is foreseen to decrease by 4% in 2009, and the budget deficit to reach 4.5% of GDP. A slow recovery is expected in 2010.

The European Investment Bank and European Bank for Reconstruction and Development have also enhanced their investment support in Serbia and the other Western Balkan countries. The Commission welcomes key support from private EU based parent-banks having a subsidiary in Serbia that have committed to maintain their financial exposure on the country.

MFA is an exceptional EU crisis response instrument available to EU neighbours. It is conditional and complements assistance by the IMF. The IMF capacity to help countries with financial difficulties is being considerably increased by EU Member States and other IMF members. The EU recently committed to provide €125 billion to the IMF, which is 35% of the increase in the IMF's lending capacity from $250 billion to $750 billion.

MFA loans are financed through EU bond emissions on the market. The money is lent with similar financial terms

Source  Delegation of the EC to Serbia

More information  Delegation of the EC to Serbia

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